Presentation on theme: "FRANCHISING & THE ENTREPRENEUR. Contents The role of franchising in U.S & global economy What is a franchise? Types of franchising The pros & cons of."— Presentation transcript:
Contents The role of franchising in U.S & global economy What is a franchise? Types of franchising The pros & cons of buying a franchise Franchising and the laws The right way to buy a franchise Trends shaping franchising
Figure 6.2 The Franchising Relationship The Franchiser The Franchisee Oversees and approves; may choose site Provides prototype design Makes general recommendations and training suggestions Determines product or service line Can only recommend prices Establishes quality standards; provides list of approved suppliers; may require franchisees to purchase from the franchisor Develops and coordinates national ad campaign; may require minimum level of spending on local advertising Sets quality standards and enforces them with inspections; trains franchisees Provides support through an established business system Chooses site with franchisers approval Pays for and implements design Hires, manages, and fires employees Modifies only with franchisers approval Sets final prices Must meet quality standards; must purchase only from approved suppliers; must purchase from supplier if required Pays for national ad campaign; complies with local advertising requirements; gets franchisor approval on local ads Maintains quality standards; trains employees to implement quality systems Operates business on a day-to-day basis with franchisers support Site selection Design Employees Products and services Prices Purchasing Advertising Quality control Support Element Source: Adapted from Economic Impact of Franchised Businesses: A Study for the International Franchise Association, National Economic Consulting Practice of PriceWaterhouseCoopers, (IFA Educational Foundation, New York: 2004), pp. 3,5.
Table 4.4 Advantages and Disadvantages of Buying a New vs. an Established Franchise ProsCons New Franchise Can be new and exciting Business concept can be fresh and different in the market Possibility of getting lower fees as a pioneer of the concept Potential for a high return on investment Business is not tested or established in the market Unknown brand and trademark Possibility that the concept is a fad with no staying power Franchiser may lack the experience to deliver valuable services to franchisees Established Franchise Business concept likely is well- known to consumers and market for the products or services is already established Franchiser has experience in delivering services to franchisees Franchiser has had time to work the bugs out of the business system High franchise fees and costs that often are non-negotiable Concept may be on the wane in the market Franchisers brand and trademark may remind customers of an outdated concept Franchisers trade dress may be in need of updating and redesigning Source: Based on Andrew A. Caffey, Age Issues, Entrepreneur, January 2002. p. 118.